Eurozone's biggest casualty

Rome - Silvio Berlusconi dominated Italy for 17 years with a
unique mix of political talent and brazen behaviour, but in the end it was
market pressure from abroad that brought him down.

Berlusconi confirmed on Tuesday that he would stand down
after a new budget law is approved in parliament.

"After the approval of this finance law... I will
resign, to allow the head of state to open consultations," he told his own
Canale 5 television.

Bolstered by unrivalled communication skills and a dominance
of Italian media, Berlusconi had for years seemed immune to a series of
controversies that would have destroyed a politician in most other parts of the
world.

They included the lurid "Rubygate" scandal in
which he was charged with having sex with an under-age prostitute, and included
a wave of salacious revelations from police wiretaps about alleged orgies at
his luxurious Milan villa.

He also faces two ongoing fraud court cases, the latest in
more than 30 prosecutions by magistrates he accuses of being communists bent on
perverting democracy.

The perma-tanned media tycoon, once a cruise ship crooner,
was always unrepentant about a notoriously off-colour sense of humour and a
series of diplomatic gaffes which have led some foreign leaders to try to avoid
being photographed near him.

Berlusconi, at 75 one of Italy's richest men, had been in
political decline for most of this year, his former mastery undermined by
glaring misjudgements in local elections and three referendums as well as the
loss of a key alliance.

But he had seemed to have a good chance of hanging on to
scheduled elections in 2013, until markets spooked by the Greek crisis turned
on Italy, focusing on factors that had existed for years - stagnant growth and
a debt mountain equal to 120% of gross domestic product (GDP).

As the eurozone debt crisis rapidly accelerated, Italy's
government bonds came under increasing pressure and the European Central Bank
(ECB) agreed in August to buy them in return for a tough austerity budget.

His agreement to resign on Tuesday came as Italian bond
yields came close to the red line of 7%. He had already been forced to accept
humiliating IMF monitoring of the reforms- fruit of international scepticism
that he could implement them.

Words but no action

Major disagreements within Berlusconi's coalition,
especially a refusal to sanction deep pension reform by the Northern League,
meant his promises to implement economic reforms in return for ECB bond buying
were never followed by action, prompting increasing impatience among fellow
eurozone leaders.

Deputies in his PDL party finally decided they had had
enough and abandoned him in numbers, fearing their electoral support would be
wiped out and seeing him as a liability.

Berlusconi's final demise was a far cry from 2008 when a
landslide victory gave the media tycoon his strongest electoral mandate. He had
been prime minister for longer than any postwar leader, painting himself as the
only choice for the dominant conservative voting bloc and a bastion against
communism.

But he did not have long to savour his third election
triumph. In 2009 his estranged wife Veronica denounced his sex life and accused
him of consorting with under-age women, finally sowing doubts in the minds of
voters who had hitherto been charmed by his image as a self-made macho Latin
male.

In addition, Berlusconi has persistently shown himself to be
better at promises than action, failing to implement pledges in 2008 to use his
business acumen to liberalise a notoriously inflexible and protected economy.

Berlusconi's political decline can be dated to last
December, when he expelled his party's co-founder and former ally Gianfranco
Fini. This robbed him of a comfortable parliamentary majority based on Fini's
supporters and turned the house speaker into a dangerous enemy.

He has also been undermined by a famously frosty
relationship with Economy Minister Giulio Tremonti.

The decline accelerated when Berlusconi suffered a major
local election loss in his northern base of Milan in May and defeats in water
and nuclear power referendums in June. The defeats were seen as down to his own
misjudgement.

Starlets and diplomatic gaffes

He has also shown a dangerously slow appreciation of how his
dominance and popularity have declined, continuing to crack inappropriate
jokes, making insulting comments in phone calls he must suspect are tapped and
underestimating an economic crisis causing real pain.

Berlusconi initially laughed off the economic problems as a
figment of the Left's imagination and only a few days ago caused offence by
saying Italy was not really in crisis, with the restaurants full and holiday
flights fully booked.

Often derided abroad for his facelifts, hair transplants,
make-up and diplomatic gaffes, Berlusconi until recently commanded a large
following particularly among middle class women, pensioners and the
self-employed, striking a chord with his warnings about the dangers of
left-wing extremists.

As owner of Italy's main private television channels and
top-flight soccer team AC Milan after making a fortune in a Milan construction
boom, he typified an Italian dream, with millions won over by his
rags-to-riches story and optimism.

Berlusconi created his own party almost overnight in 1994 to
fill the void on the right caused by the destruction of the long-dominant
Christian Democrats by a corruption scandal.

His media empire Mediaset has a near-duopoly in television
with state-run RAI over which, as premier, he has ultimate control. This gives
him a much-criticised stranglehold on Italian media, while he is accused of
lowering cultural values with variety shows dominated by scantily clad
starlets.

Critics say he has used his political and media power to
fend off many prosecutions.

If Italians have until now laughed off many of his gaffes, they
have caused more offence abroad.

He once caused a minor diplomatic incident by suggesting he
had seduced Finnish President Tarja Halonen to persuade her to let Italy host a
new EU food safety agency. He called US President Barack Obama
"suntanned".

Italians are traditionally indulgent of politicians' private
lives but Berlusconi's popularity waned as lurid details from leaked wiretaps
dominated newspapers, contrasting with his formal espousal of traditional
family values.

In the last year the Catholic Church has distanced itself
from him, following reports of starlets and prostitutes dancing half-naked for
him in return for cash and gifts. He boasted in one phone call of having sex
with eight women in one night.

Berlusconi has always maintained the dinners he hosted were
jovial affairs that involved little more than food, jokes and song.

His only
concession has been to say he is "no saint" and loves beautiful
women.